D. Andrew Austin
Analyst in Economic Policy
Mindy R. Levit
Analyst in Public Finance
Total federal debt can increase in two ways. First, debt increases when the government sells debt
Analyst in Economic Policy
Mindy R. Levit
Analyst in Public Finance
Total federal debt can increase in two ways. First, debt increases when the government sells debt
to the
public to finance budget
deficits and
acquire the financial resources needed to
meet its obligations. This increases debt held by the
public.
Second, debt increases when
the federal government
issues
debt to certain
government
accounts, such as the Social Security,
Medicare, and
Transportation trust funds, in
exchange for their
reported surpluses. This increases debt held
by government accounts. The sum
of debt held
by the public and
debt held by government accounts is
the total federal debt. Surpluses reduce debt held
by the public, while deficits raise it.
On August
2, 2011, President Obama
signed
the
Budget Control Act of
2011 (BCA; S. 365; P.L. 112-25), after an extended debt limit
episode. The federal debt had
reached
its legal limit on May
16, 2011, prompting Treasury Secretary Timothy Geithner to
declare a debt issuance suspension
period, allowing certain
extraordinary measures
to extend Treasury’s borrowing
capacity. The BCA
included provisions aimed
at deficit reduction and
allowing the debt limit
to rise between
$2,100 billion
and $2,400 billion in three stages, the latter two subject to congressional
disapproval. Once the BCA
was enacted, a presidential certification triggered a $400 billion
increase,
raising the debt limit
to $14,694 billion, and a second
$500 billion increase on
September 22,
2011, as a disapproval measure (H.J.Res. 77) only passed
the
House. A January 12, 2012, presidential certification
triggered
a third, $1.2 trillion increase on January
28, 2012,
although
the House passed a disapproval
measure. Federal debt reached its limit
on December 31,
2012. Extraordinary measures were
estimated
to allow payment
of government obligations
until mid-February
or early March
2013. H.R. 325, which suspends the
debt limit until May 19, 2013, was passed by the House
on January 23,
2013, by the Senate on January 31,
and was signed into
law (P.L. 113-3)
on February 4. As of May
19, the debt limit was
set at $16,699 billion. On
May 9, 2013, the House passed H.R.
807, which would modify the debt limit
to allow financing of interest payments
for debt held by the public and the Social Security trust funds.
Congress
has always
restricted federal debt. The Second Liberty Bond Act of 1917 included an
aggregate limit on federal debt
as well as limits
on specific debt issues. Through the
1920s and 1930s, Congress
altered
the
form of those restrictions to give
the U.S. Treasury more flexibility in debt management
and to allow modernization of federal
financing.
In 1939, a general limit
was placed on federal
debt.
Congress,
aside
from
two measures noted above, has
modified the debt limit 10 times
since 2001, due to persistent
deficits and
additions to federal trust funds.
Congress raised the limit
in June
2002, May 2003, November 2004, March
2006, and September 2007.
The 2007-2008 fiscal crisis and subsequent economic slowdown led to sharply higher deficits in recent
years, which led to
a series of debt limit increases. The
Housing and Economic Recovery Act of 2008 (H.R. 3221), signed into law (P.L. 110-289)
on July 30, 2008, included a debt limit increase. The Emergency
Economic Stabilization Act of
2008 (H.R. 1424), signed
into law on October 3 (P.L. 110-343), raised the debt limit again. The debt limit rose
a third time in less
than a year
to $12,104
billion with
the passage
of the American Recovery and
Reinvestment Act
of 2009 on February 13, 2009
(ARRA; H.R. 1), which was signed into law
on
February 17, 2009 (P.L.
111-5). Following that
measure, the debt limit
was subsequently increased by $290 billion to
$12,394 billion (P.L. 111-123) in
a stand-alone debt limit bill
on December 28,
2009, and by $1.9 trillion
to
$14,294 billion
on February 12, 2010 (P.L. 111-139),
as part
of
a package that also contained the Statutory Pay-
As-You-Go Act
of 2010. This report will be updated as
events warrant.
Date of Report: August 14, 2013
Number of Pages: 43
Order Number: RL31967
Price: $29.95
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